Sales tax evasion: The case of monopolists

Hideki Sato

MPRA Paper from University Library of Munich, Germany

Abstract: This study addresses the following two questions focusing on state sales tax and the behavior of a monopolist: (1) Under what conditions would a monopolist evade state sales tax even if evasion is costly? and (2) Can tax rates and enforcement be effective deterrents against evasion? The analysis reveals that, under certain conditions, a monopolist facing enforcement may underreport sales rather than not report them at all, even if evasion incurs costs. Furthermore, this study demonstrates that reducing tax rates and strengthening enforcement can effectively prevent tax evasion and that such preventive measures can lead to increased tax revenue.

Keywords: Sales tax; Monopolist; Tax evasion; Tax enforcement. (search for similar items in EconPapers)
JEL-codes: D42 H26 H32 H71 (search for similar items in EconPapers)
Date: 2025-12-22
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:127426

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